The Dismal Science: How Thinking Like an Economist Undermines Community

[cmac2012]

by Stephen A. Marglin

http://www.amazon.com/Dismal-Science-Economist-Undermines-Community/dp/0674026543

The author was interviewed on a SF based NPR show, "Tech Nation." Interesting stuff about overmuch devotion to monetization. One bit that caught my ear is his contention that insurance as practiced today, the reliance on it to offset losses that is, has a deleterious effect on community. He mentioned that the Amish forbid use of insurance. When a barn burns down, or the like, the community has a barn raising. Using some faceless entity at some great distance to safeguard homes and family was deemed to be incompatible with the values they hold dear. And with someone getting rich from administering the setup, that wealth had to come from somewhere -- policy holders were getting back less than they paid out.

I'd had a similar notion about insurance years ago, that insurance tends over time to take the place of people's concern for their neighbor.

This review was at Amazon:

Robert Jones, Emporia, Kansas:

There are many things wrong with capitalist economics and I agree with Marglin that economic theory is made up of a great many half truths. I believe that Margin misses the most serious error in capitalism however. Capitalist economics employs a theory of value which is not consistent with traditional human values and society's legal system.

We must begin by distinguishing two different sorts of quantities, scalars and vectors. A scalar is a quantity that can be described by just a number. Your age, or height, or weight, or the number of people in a room, these are scalar quantities. A vector, on the other hand, is a quantity that requires two or more numbers in order to describe it. An example might be the journey "3 blocks north and 5 blocks east." These two distances must remain distinct. Motion northward can not substitute for motion eastward or vice versa.

Value monism is the idea that there is only one thing of value (pleasure perhaps) or that at least it is possible to define a single "common currency" in terms of which the value of all things can be measured (money). Value pluralism is simply the rejection of value monism, the idea that there are two or more things to be valued (e.g. your wife's love and your child's life) and that they can not be reduced to, or compared via, some common currency.

In capitalist economic theory a utility function maps any state of affairs (with its costs, rewards, opportunities, etc.) to a real number, a scalar. Frequently this scalar utility is simply money; in other situations it is some more generalized scalar quantity.

Human beings have multiple needs. For instance, we need air to breathe, water to drink, and food to eat. Many of these needs are "incommensurable," that is, they can not be measured by a common standard; one can not be traded off for another. No amount of water can make up for having no food to eat. A plentiful supply of fresh air can not make up for a lack of water to drink.

Human values, in turn, arise from our needs and are also incommensurable. (Berlin, Concepts and Categories, PU Press, 1998, pg XVIII) Economic utility must be a vector quantity, it can not be a scalar "money." Business and capitalism are profoundly in error when they employ a mere scalar utility. A common currency is simply impossible. (Just the instruction "travel 8 blocks" is not adequate to represent "3 blocks north and 5 blocks east.") In the words of Beardon et al "contrary to the widely held and inveterate belief of economists, there does exist a preference relation which is not representable by a utility function." (Beardon et al, 2002, J. Math. Economics, vol. 37, pg 17) Von Neumann and Morgenstern said "We have conceded that one may doubt whether a person can always decide which of two alternative...he prefers...It leads to what may be described as a many-dimensional vector concept of utility." (von Neumann and Morgenstern, Theory of Games and Economic Behavior, 1944)

Business and capitalism require value monism while the human value system is characterized by value pluralism; you need only observe the legal system. Upon being found guilty of some crimes it is only required that you pay a fine, whereas in other cases you must pay with your life, or at least some years worth. No one would be satisfied to see a serial killer merely pay a fine each time he took another life.

Not all human activities can be accurately modeled as a marketplace.

More reviews:

http://www.economics.harvard.edu/files%20/faculty/41_Marglin_jacket_copy.pdf